GOVERNMENT will continue to ensure stability of the exchange rate by using appropriate fiscal and monetary instruments while maintaining a fine balance between the use of such instruments and growth objectives, Minister of Finance Alexander Chikwanda has said.
In ensuring exchange rate stability, Mr Chikwanda said the Bank of Zambia (BoZ) has tightened monetary policy and has been selling foreign exchange to the market, which has led to a relative stability of the currency observed since November, 2015.
He said in a ministerial statement presented to Parliament on the state of the economy on Wednesday.
Mr Chikwanda said the move has been complemented by the treasury, which has increased its operational liaison with the central bank and begun to operationalise the treasury single account to facilitate effective cash flow management.
“As a result of these interventions, the Kwacha appreciated against the US dollar by 8.6 percent to K10.98 in December, 20l5 from Kl3.7 at end September, 2015,” he said.
Mr Chikwanda said the Kwacha has also firmed up against other major trading partner currencies and has currently stabilised around K11.30 per US dollar despite the bias for the larger part of 2015 being towards depreciation of the local currency.
“For instance, the Kwacha depreciated by 24 percent and 20 percent in September and October, 2015, respectively [against the dollar],” he said.
On inflation, Mr Chikwanda attributed the higher inflation, which stood at 21.1 percent in December 2015, to the pass-through effects of the sharp depreciation of the Kwacha in the third quarter of 2015 coupled with the high production costs which were induced by power rationing.
He, however, said inflation is expected to remain high, particularly during the first half of this year, although predicates a sharp decline from the third quarter.
“We project that inflation will close the year at around 15 percent. Over the medium term, we expect inflation to return to a single digit level as the exchange rate stabilises, fiscal deficit reduces and the power situation improves,” Mr Chikwanda said.
This does not inspire any confidence at all. You should be talking about long term policies that will help bring the rate down. South African Rand has recovered from its slump and investor confidence is back in the positives. Tell us about long term policies not these piecemeal solutions of offloading US Dollar on the market from the treasury. Chikwanda is probably the worst Finance Minister Zambia has ever had. Only good at negotiating loans.
Don’t worry Zambians will soon reject PF just like Jamaicans have today rejected the ruling party which has brought misery among he poor by its IMF policies which this visionless PF and Chikwanda want to subject Zambians again.
It is sad that politicians are taking advantage of the citizens limited understanding of the the policy the minister is referring to. The policy on the table removes money (Kwacha) from the market, through an instrument called Open Market Operation (OMO). OMO is the on keeping the inflation in check, implying truly opposite to the more money in the pocket. The daily liquidity is almost at 60% of normal supply. Hence to matemba are suffering.
i dont have a problem with stabilizing our kwacha, the problem i have is you are not addressing your insatiable appetite to spending for the sake of elections
nothing new he has said. we all know this boring story repeated over and over again.
he needs to retire and rest on a farm and count cows instead.
Zambia in the SUN….. God help us!
This fossil is out of his depth…i can not eait to see him retire to pasture in August!!
This is appreciated. We get an honest appraisal of what our Kwacha us doing and as stated there has been Central Bank commendations on our strategy/policy performance.
We have been given short term, Medium term and Long term projections which all prove an improvement in the kwacha and inflation. We have something to measure by.
All the negative noise is just Cadre Election yapping mainly UPND hoping their inept International Relations failure HH will come to power with his diplomat friends. We’ll sort this!!
@Matawali Kaleza, keep dreaming man and your HH!